The information below applies to a competitive firm that sells its output for $45 per unit....

The information below applies to a competitive firm that sells its output for $45 per unit. • When the firm produces and sells 120 units of output, its average total cost is $23.5. • When the firm produces and sells 121 units of output, its average total cost is $23.65. Refer to Scenario 14-2 . Let Q represent the quantity of output. Which of the following magnitudes has the same value at Q = 120 and at Q = 121? a. Total revenue b. Total cost c. Average revenue d. Average fixed cost

Solutions

Expert Solution

Ans: c ) Average revenue

Explanation:

Under perfect competition , the industry is the price maker whereas the firm is the price taker. It means there is an unique price in the market . Firms are not able to change the market price. They sell or produce as much as they can at the prevailing market price.

So under perfect competition , Price = Marginal Revenue = Average Revenue ( P = MR = AR)

AR = Total Revenue / Quantity

Total Revenue = Price * Quantity

Q	Price	Total Revenue	Average Total Cost	Total Cost	Average Revenue
120	45	5400	23.5	2820	45
121	45	5445	23.65	2861.65	45

Rahul Sunny answered 1 year ago

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